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Nice Summit: Tax Veto

Volume 620: debated on Tuesday 16 January 2001

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2.51 p.m.

Following the Nice European Council, whether the United Kingdom tax veto will necessarily be used on all issues.

My Lords, the Government were right to insist at the Nice European Council that tax proposals must remain subject to unanimity. We shall continue to judge every tax proposal on its merits and according to the national interest.

My Lords, it may be that my noble friend did not notice that he has not answered my Question. Perhaps I may revert to my specific Question. Suppose, for example, that every European Union state agreed with a measure that would eliminate to a large extent tax evasion and tax fraud. Can I take it that my noble friend and the Government would support such a measure and not veto it?

My Lords, I think my Answer was a precise reply to my noble friend's Question. Clearly we try to avoid vetoes wherever we can. We try to achieve the national interest by agreement rather than by veto. If a proposal such as that suggested by my noble friend—and, of course, it is only a supposition on his part—were to be an unalloyed improvement in combating tax fraud, we would not need to veto it; we would approve it on its own merits.

My Lords, will the Minister accept my congratulations on the Government allowing the British people to enjoy their 13th year with a top tax rate of 40 per cent, a rate which was introduced as a result of a radical move by my noble friend Lord Lawson in his 1988 Budget? Does the Minister recognise that in European terms Britain is now something of a tax haven? Does he agree that we must retain the veto because the French constantly call for a level playing field on tax, by which they mean that our tax rates should rise to their levels?

My Lords, the noble Lord is merely congratulating the Government on fulfilling their election manifesto, which we have done not only in this case but in many other cases. As to the suggestion that the French, or any other European country, are seeking equal levels of taxation throughout Europe, I can say only that: that position was not seriously put forward at Nice and was not a result of Nice.

My Lords, is it not a commonplace of economics that if there is to be a single market—and, as I understand it, everyone agrees, whatever their other views of the European Union, that there should be a single market—it must be beneficial largely to harmonise taxes? Do the Government accept that, at least, as a minimal proposition of tax policy?

My Lords, the Government have never been opposed to tax harmonisation when it is in the interests of this country. There has never been a blanket opposition to any move towards tax harmonisation. What we have opposed is any suggestion that the European Commission or the European Union should have control over our tax policy in this country. That position was sustained and upheld at Nice.

My Lords, does the Minister agree that it will be widely welcomed that he has accepted that there is a distinction to be made between the existence of a veto, which is welcome, and its exercise, which is not always desirable? Does he further agree that the existence of the single market, and even more so the existence of the euro, makes diversity of taxes rather than harmonisation more desirable? Does he further agree that sometimes it may be desirable to join, or even help create, a consensus in favour of measures such as have been suggested for dealing on a European basis with tax avoidance or evasion, and even a common policy in regard to using fiscal measures to encourage the protection of the environment and public health?

My Lords, I think I can agree with the first and third of the propositions of the noble Lord, Lord Brittan. As to the question of whether the euro will increase the necessity for diversity in taxation levels or taxation policies—I am not quite sure which he is suggesting—that remains to be seen.

My Lords, is it not the case that the Government have, in the course of the Nice negotiations, surrendered the veto which we previously had over measures to secure so-called enhanced co-operation? Is it not further the case that, as a result, a vanguard group of European countries can now go ahead with tax harmonisation and other measures, whether or not we like it? Was it not foolish of us to have abandoned so important a bargaining power without having gained any thing worth while in return?

My Lords, I am afraid the first premise on which my noble friend bases his argument is simply untrue. There was no surrender of tax powers of any kind at the Nice Summit.

My Lords, I really must correct that. My noble friend has got it wrong.

My Lords, the noble Lord, Lord Barnett, asked a hypothetical question of the Minister. Perhaps I may ask him a practical question concerning events this week in Strasbourg. Is he familiar with, and can he shed some light on, the so-called RETT Committee, which is the committee on regional policy, transport and tourism? That committee decided on 22nd November, under procedure A5-0345/2000, by a vote of 48 to eight, that member states should impose a new taxing and charging system for public transport, the result of which will be new taxes on the use of cars, motor insurance, parking, roads, railways, stations. air transport and airports, shipping arid ferries, ports, bridges and so on? Will the Government veto this set of new taxes? If so, why did the Labour members of the committee vote for the new tax?

My Lords, the Question on the Order Paper refers to matters considered at the Nice European Council. I am not aware that the matter raised by the noble Lord was considered at that summit. I shall be happy to write to him on the subject and place a copy of my reply in the Library.